Economy

Over the last several weeks I have tried to bring a more accurate picture of the debts of a number of nations to you. There has been no bias and the figures have stood on their own merit. The statistical component of the European Union, Eurostat, is quite clear; they do not count guarantees or contingent liabilities as part of any nation’s debt. We might all note that if Nestle or IBM or General Electric did this they would find their senior executives jailed for Fraud but never mind; this is the methodology of the EU which quite obviously masks the truth.

The problem then is not the simple math used to obtain a more accurate debt to GDP ratio but in digging out the various guarantees, contingent liabilities and obligations of any member nation of the European Union. “Time consuming” would be the accurate words because you have to sleuth around like Sherlock Holmes to come up with the data. Yes, it is all there somewhere or another but it is nowhere all together and so must be found.

Japan is on an unsustainable path of a strong yen and deflation. The unprofitability of Japan's major exporters and emerging trade deficits suggest that the end of this path is in sight. The transition from a strong to weak yen will likely be abrupt, involving a sudden and big devaluation of 30 to 40 percent. It will be a big shock to Japan's neighbors and its distant competitors like Germany. The yen's devaluation in 1996 was a main factor in triggering the Asian Financial Crisis.

The justification for the low JGB yield is deflation. The real interest rate (the nominal rate plus deflation) is comparable to that in other countries. This rationale requires deflation to persist. But, deflation shrinks the nominal GDP or tax base. How could the government pay back its escalating debt by taxing a shrinking economy? It can only sustain its debt by borrowing more. This fits the definition of a particular type of Ponzi scheme.

Unemployment was also elevated during that period, by historical standards: it averaged 7.3% across those nine years, topping out at 10.8% in late 1982, a post-war high that still stands. Meanwhile private investment as a percentage of GDP averaged around 12% during this period, nearly 1.5 percentage points below the subsequent high growth years of 1983-2000. Lastly, the Dow Jones Industrial Average, which had flirted with the 1000-level in both 1966 and 1972, sunk to a secular low of 776 in August, 1982, with U.S. equities having lost nearly 70% of their inflation-adjusted value across those 16 years.

And a small group of wealthy Americans were already plotting a fascist military coup by a band of hired brigands designed to overturn the Constitution and place the country in the hands of the rich and the powerful as they had helped to do in Germany.

It sure is for those of us in the top 1% (1.4M) - people earning over $352,000 in annual income. We made $105,637 more Dollars in 2010 than we did in 2009 - thanks in large part to the Fed's fantastic policy of printing more and more money, which lets us borrow cheaply or invest with leverage in inflating equity as the Dollar collapses.

Gotta love this from Bloomberg. Debt collectors are now going after college graduates who owe student loans… On behalf of the federal government. The story highlights the sorry saga of Oswaldo Campos, who is disabled from liver disease (presumably, although with all of the disability fraud, who can tell) and was harassed by debt collectors contracting with the US Department of Education with calls threatening “We’re not playing here. You’re dealing with the federal government. You have no other options.”

The Federal Reserve made those decisions. There were no Congressional votes and no input from the public. The Federal Reserve determined who the winners and the losers would be in secret and without any public debate.

Sure sounds “democratic”, eh?

Energy

Perhaps we should be considering a different method of regulating natural gas, since in many ways natural gas is essential. It is needed for balancing wind and solar PV, and for allowing us to continue to continue to heat our homes and businesses with natural gas. In the early days of gas, gas was regulated to produce a reasonable rate of return for providers. Perhaps something closer to this approach needs to be used again today.

The Deepwater Horizon incident demonstrated that most of the oil left is deep offshore or in other locations difficult to reach. Moreover, to obtain the oil remaining in currently producing reservoirs requires additional equipment and technology that comes at a higher price in both capital and energy.

Environment

A dosimeter lowered into the containment vessel of the No.2 reactor registered 72.9 sieverts, or 72,900 millisieverts per hour at maximum -- a level where a human is certain to die within about 7 minutes of exposure.

While MOO isn’t a pure play on the fertilizer and chemicals sectors (it has a nice mix of agricultural-related industries), it offers wide exposure to increased demand for agricultural-related products.

Contrarian investors know that unique events create unique investment opportunities — which means to be a successful investor you must always be on the hunt for “one off” events and the potentially profitable opportunities they present.

Article suggestions for the Daily Digest can be sent to dd@PeakProsperity.com. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

Some of modern medicine's most heralded interventions -- from routine surgeries to organ transplants and cancer treatments -- may soon be too dangerous. The viability of these procedures hinges on physicians' ability to use antibiotics to swiftly vanquish any bacterial infections that might arise in the course of treatment. For decades, physicians have been able to choose from hundreds of different kinds of antibiotics to do the job, including many powerful "broad spectrum" varieties that indiscriminately kill a wide range of bacteria. But over the past two decades, antibiotic drugs have started to fail one by one, as bacteria with resistance to them have emerged and spread.

In India, antibiotic use is virtually unregulated. Antibiotics are widely available without a prescription and, as in the United States, affluent people tend to consume the drugs whether medically necessary or not -- for everything from colds to diarrhea. So, it is no wonder that, even before the new super-resistant strain was first documented, over 50 percent of the bacterial infections that occurred in Indian hospitals were resistant to commonly used antibiotics.

In the United States alone, fighting drug-resistant infections costs up to 8 million additional patient hospital days and up to $34 billion every year.

The pandemic potential of (NDM-1) is enormous. Indeed, according to Tim Walsh, a University of Cardiff medical microbiologist who has been chasing the dangerous gene, NDM-1 infections already turned up in more than 35 countries last year -- often in the bodies of medical tourists, who had traveled to India or Pakistan for cheap surgeries and other procedures.

Part of the problem in taming the bug is an ongoing failure to develop drugs to combat it. Despite growing global demand (and the World Health Organization's recognition that drug-resistant pathogens are one of the greatest threats to human health) the drug industry hasn't launched a new class of antibiotics to treat the class of bacteria susceptible to the NDM-1 gene in 45 years.

Not only will the US dollar be challenged, but also the entire international financial regime – led by the World Bank and the International Monetary Fund – which has been dominant since the end of World War II.

The north will be pitted against the entire south in a historic competitive currency battle – whose terrain has moved to the Indian capital New Dehli – where the Brics (Brazil, Russia, India China and South Africa) nations will assemble next week.

ATK announced that it is being awarded an Indefinite Delivery/Indefinite Quantity (IDIQ) agreement from the Department of Homeland Security, U.S. Immigration and Customs Enforcement (DHS, ICE) for .40 caliber ammunition. This contract features a base of 12 months, includes four option years, and will have a maximum volume of 450 million rounds.

ATK was the incumbent and won the contract with its HST bullet, which has proven itself in the field. The special hollow point effectively passes through a variety of barriers and holds its jacket in the toughest conditions. HST is engineered for 100-percent weight retention, limits collateral damage, and avoids over-penetration.

"We are proud to extend our track record as the prime supplier of .40 caliber duty ammunition for DHS, ICE," said Ron Johnson, President of ATK's Security and Sporting group.

I was talking to a local gun dealer last night. He did some checking around and found that .223 ammunition is impossible to get right now. He had 18 boxes on hand a week ago and one guy walked in and bought all 18 boxes. Since then he has been unable to buy any more.

I was talking to a local gun dealer last night. He did some checking around and found that .223 ammunition is impossible to get right now. He had 18 boxes on hand a week ago and one guy walked in and bought all 18 boxes. Since then he has been unable to buy any more.

Doug

Doug -

How many boxes do you need? 500 round cases are between $100-120 here in Virginia.

I was talking to a local gun dealer last night. He did some checking around and found that .223 ammunition is impossible to get right now. He had 18 boxes on hand a week ago and one guy walked in and bought all 18 boxes. Since then he has been unable to buy any more.

Doug

Doug -

How many boxes do you need? 500 round cases are between $100-120 here in Virginia.